Energy-poor Jordan faces explosive electricity hikes

Posted by Israel Industries press review of the week on juillet 12th, 2013

Jordan’s government says it will introduce much-postponed and politically explosive electricity price hikes shortly as it battles with disruptions to its supply of Egyptian natural gas.

There’s a danger the wildly unpopular price hikes will trigger anti-government — and anti-monarchy — riots amid seething discontent in the resource-poor Hashemite kingdom, a key U.S. ally on war-torn Syria’s southern flank that has so far escaped the full force of the unrest that has been roiling the Arab world since 2011.

But on the energy issue, King Abdullah II faces deep trouble whatever he does to try to resolve the worsening energy crisis.

Amman is holding talks with neighboring Israel to become the first country to buy the Jewish state’s natural gas from its new-found fields in the eastern Mediterranean.

That would be an infinitely cheaper method of generating electricity than the costly oil the kingdom has to import from Iraq and Saudi Arabia.

But even that option carries serious political risks for the pro-Western Abdullah, whose 14-year-old rule is being increasingly challenged by Jordan’s 6.5 million people, more than half of them Palestinians.

His late father, the widely revered King Hussein, signed a peace treaty with Israel in October 1994, but it remains immensely unpopular with Jordanians.

If Abdullah has to turn to the Jewish state for economic salvation, he could find himself in even deeper trouble than he is now.

When his government scrapped fuel subsidies and raised prices in November 2012 — part of a program of tough budgetary reforms to meet the terms of a $2 billion International Monetary Fund standby agreement — riots erupted across the largely desert country squeezed between violence-torn Syria and Iraq, Israel and Saudi Arabia.

But amid the cries of dissent there was also anger boldly directed at the monarchy itself, established by Abdullah’s great-grandfather under British protection after World War I.

Most worrying of all, this anger came from the so-called East Bankers, the Bedouin tribes who’ve been the bedrock of the Hashemite monarchy since it was established and provide the manpower for the army and the intelligence services.

The worsening economic hardship stems in large part from the energy crisis. And this has been deepened by the economic fallout from the political turmoil sweeping the Arab world since January 2011, the so-called Arab Spring.

Egypt was Jordan’s energy lifeline until the fall of Hosni Mubarak in February 2011. The ensuing collapse of security led to the repeated bombing of the gas pipeline from the Nile Delta.

Since then imports have been severely disrupted, falling from 250 million cubic feet a day to an average of only 40 million cfd, forcing the kingdom to import expensive liquid fuels it can’t afford without hefty aid from the United States and other allies.

Energy now accounts for 30 percent of total imports, this year costing $18 billion, pushing Jordan’s electricity subsidy bill for 2013 to an expected $1.8 billion, roughly equivalent to the total budget deficit.

The flood of 500,000 refugees from war-ravaged Syria, equivalent to 10 percent of Jordan’s population, has greatly intensified energy demand and is straining the economy to the breaking point.

« Energy is the Achilles heel of the Jordanian economy, » Nemat Shakif, deputy head of the International Monetary Fund, said during a recent visit to Amman. « It’s a huge vulnerability for Jordan. »

In April, Jordan signed an $18 billion agreement with Iraq to build a 1,050-mile double pipeline to supply the kingdom with 1 million barrels of crude oil and 258 million cubic feet of natural gas a day from Iraq’s southern center of Basra.

Jordan would use 150,000 bpd, with the rest going through the Red Sea port of Aqaba for export that would earn Jordan an estimated $3 billion a year.

There’s also talk of reviving plans for an oil pipeline from Saudi Arabia and import of liquefied natural gas from the gulf state of Qatar. Jordan supposedly sits on some 100 billion barrels of shale oil that it wants to exploit.

But the possibility of importing gas from Israel, now that the Jewish state has started production from its offshore fields, with 40 percent allocated for export, remains the most feasible, though politically dangerous, option.

This leaves Abdullah between a rock and a hard place, knowing that whatever course of action he chooses, he’s taking big risks that could cost him his crown.

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